Dec 21, 2023: Oil prices experienced stability on Thursday, with Brent hovering close to $80 a barrel amidst concerns about higher inventories and the United States hitting record production levels. Brent crude futures saw a modest increase of 13 cents, reaching $79.80 a barrel, while U.S. West Texas Intermediate crude rose by 4 cents to $74.26.
John Evans, an analyst at PVM Oil, highlighted that the oil market was concerned about the current state of U.S. production, leading to a slightly more reserved sentiment compared to recent days.
The U.S. Energy Information Administration (EIA) revealed that U.S. crude inventories unexpectedly rose by 2.9 million barrels in the week ending Dec. 15, contrary to expectations of a 2.3 million barrel drop as forecasted by analysts in a Reuters poll. Additionally, U.S. crude output surged to a new record of 13.3 million barrels per day (bpd) last week, surpassing the previous all-time high of 13.2 million bpd.
Despite these figures, worries about trade disruptions persisted as major maritime carriers avoided the Red Sea route due to geopolitical tensions. This redirection of vessels has escalated transport and insurance expenses, affecting about 12% of global maritime traffic passing through the Red Sea and the Suez Canal. However, the impact on oil supply has remained limited as the bulk of Middle East crude exports pass through the Strait of Hormuz.
MUFG analyst Ehsan Khoman indicated that these disruptions might not significantly impact energy supplies, emphasizing that the challenge lies in global supply chain disruptions rather than actual production volume.
Moreover, the alterations made by the U.S.-led coalition in limiting sea-borne Russian oil exports were highlighted, with the Treasury Department aiming to tighten compliance measures to prevent Russian exporters from bypassing the set cap.